Oil Crises and Climate Challenges: 30 Years of Energy Use in IEA Countries

(Brussels) — 2 March 2004

“There is an urgent need to consider ways to accelerate the decoupling of energy and CO2 emissions from economic growth,” said Claude Mandil, Executive Director of the International Energy Agency (IEA) at the launch in Brussels today of Oil Crises and Climate Challenges: 30 Years of Energy Use in IEA Countries.

This new publication examines how energy efficiency and factors such as economic structure, income, lifestyle, climate, prices and fuel mix have shaped developments in energy use and CO2 emissions in IEA countries since the organisation was founded 30 years ago. It looks at developments sector-by-sector in detail and provides energy policy-makers with data and insights that will help them find ways to use energy efficiency and lower-carbon fuels to achieve a more sustainable future.

One of the major findings of the report is that IEA countries have significantly reduced the need for energy to fuel economic growth. Compared to 1973, it now takes one-third less energy to produce a unit of GDP in IEA economies. An important reason for this development is the considerable energy savings that have taken place in the various branches of manufacturing, in different end-uses in households and commercial buildings, and for different modes of passenger and freight transportation. The IEA analysis shows that without the savings achieved since 1973, IEA energy use at the end of the 1990s would have been 50% higher than what it actually was.

Oil continues to dominate the IEA fuel mix. Yet since 1973 oil consumption declined in all sectors except transport. The fall in oil consumption was particularly strong in manufacturing, a result of both switching to other fuels and a strong decline in energy per unit of output. The gains in manufacturing resulted from improved energy efficiency and shifts to a less energy intensive structure (“more chips, less steel”).

The decline in oil demand was offset by the growth in transport oil demand, so that IEA oil demand levels in 2001 were comparable to those in 1973. The most important reason behind the growth in transport demand is the increased use of cars for passenger travel. Car ownership levels have risen by 100% or more in many countries since 1973, and while car engines have become more efficient over the years, cars have also become bigger, heavier and more powerful. This has served to limit improvements in average fuel efficiency. As a consequence, oil use for cars grew almost 50% between 1973 and 1998. Furthermore, oil use for freight increased by 80% over the same period, a result of strong growth in freight haulage and by a steadily increasing share of trucking which is much more energy intensive than rail and shipping .

“The report contains an alarming message: energy savings rates across all sectors and in almost all countries have slowed since the late 1980s, as has the decline in CO2 emissions relative to GDP,” said Mr. Mandil. “This shows that the oil price shocks in the 1970s and the resulting energy policies did considerably more to control growth in energy demand and CO2 emissions than energy efficiency and climate policies implemented in the 1990s.”

Energy price developments offer some explanation of these long-term trends. Before 1973 prices were generally low. So, when prices surged after 1973, there was ample scope for improving energy efficiency as a response. But as prices generally fell after the mid-1980s, there was less incentive to sustain energy savings rates. The lower prices, combined with the fact that energy intensities were already significantly reduced, resulted in considerably lower energy expenditures for both industry and private consumers from the mid-1980s. The energy share of total production costs in some industries fell by as much as 50% from the early 1980s until the late 1990s. Similarly, the share of energy costs for stationary uses in IEA household budgets fell by 20-50% over the same period, while the fuel cost per kilometre driven by private cars fell by between 20% and 60%, depending on the country.

Most IEA countries enjoyed significant reductions in CO2 emissions per unit of GDP between 1973 and 1990, but after 1990 only a few countries saw a continued strong decoupling. While total emissions from IEA countries in 1990 were only marginally higher than in 1973, they increased 13% between 1990 and 2001, a development that is in stark contrast to what is implied by the Kyoto targets.

The slowing rates of energy savings is the primary reason for the weaker decoupling of CO2 emissions from GDP growth since 1990. In addition, fuel switching towards lower carbon fuels in electricity generation contributed less to overall CO2 emission reduction in many countries after 1990 than before.

The recent low rate of energy savings poses a concern from both an environment and an energy security perspective. Oil and electricity demand is rapidly growing. Oil consumption is driven by strong growth in transport, while the use of various electric appliances and equipment in household and commercial buildings is propelling demand for electricity.

The increase in electricity demand will greatly add to the burden of controlling CO2 emissions in IEA countries. Although nuclear remains at 11% of the total energy supply and renewables have started to make inroads for electricity generation, new generation capacity over the next few years will, in many IEA Member countries, be met by new fossil fuel-based power plants.

“The IEA’s 30th anniversary is a timely occasion to look at how energy use has developed since 1973,” said Mr. Mandil. “We are concerned that despite the major improvements in energy efficiency, recent trends indicate that stronger efforts are needed to avoid an increasing dependency on oil and to reduce the environmental impacts from growing energy demand. It is still possible to obtain at low cost, a dramatic increase in energy efficiency in our economies."

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